Homework SourseBoston Enterprises is considering a project that has the fol
Boston Enterprises is considering a project that has the following cash flow and WACC data. What is the project\'s NPV? Note that a project\'s projected NPV can be negative, in which case it will be rejected.
| WACC: | 10.00% | |||
| Year | 0 | 1 | 2 | 3 |
| Cash flows | -$1,275 | $450 | $460 | $470 |
Solution
Project will be rejected, if NPV is negative
| Year | Discounted Factor @10% | Cash Flows | Discounted cash flows |
| 0 | 1.00000 | -1275 | -1275 |
| 1 | 0.90909 | 450 | 409 |
| 2 | 0.82645 | 460 | 380 |
| 3 | 0.75131 | 470 | 353 |
| NPV | -133 |
